Correlation Between Fras Le and Rumo SA
Can any of the company-specific risk be diversified away by investing in both Fras Le and Rumo SA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fras Le and Rumo SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fras le SA and Rumo SA, you can compare the effects of market volatilities on Fras Le and Rumo SA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fras Le with a short position of Rumo SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fras Le and Rumo SA.
Diversification Opportunities for Fras Le and Rumo SA
Pay attention - limited upside
The 3 months correlation between Fras and Rumo is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fras le SA and Rumo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rumo SA and Fras Le is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fras le SA are associated (or correlated) with Rumo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rumo SA has no effect on the direction of Fras Le i.e., Fras Le and Rumo SA go up and down completely randomly.
Pair Corralation between Fras Le and Rumo SA
Assuming the 90 days trading horizon Fras le SA is expected to under-perform the Rumo SA. But the stock apears to be less risky and, when comparing its historical volatility, Fras le SA is 1.11 times less risky than Rumo SA. The stock trades about -0.18 of its potential returns per unit of risk. The Rumo SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,980 in Rumo SA on August 27, 2024 and sell it today you would earn a total of 36.00 from holding Rumo SA or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fras le SA vs. Rumo SA
Performance |
| Timeline |
| Fras le SA |
| Rumo SA |
Fras Le and Rumo SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fras Le and Rumo SA
The main advantage of trading using opposite Fras Le and Rumo SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fras Le position performs unexpectedly, Rumo SA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Rumo SA will offset losses from the drop in Rumo SA's long position.The idea behind Fras le SA and Rumo SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Rumo SA vs. METISA Metalrgica Timboense | Rumo SA vs. Lupatech SA | Rumo SA vs. Recrusul SA | Rumo SA vs. Fras le SA |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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